Poverty, Inequality, and Democracy
postcommunist
welfare states
Mitchell A. Orenstein
Mitchell A. Orenstein is S. Richard Hirsch Associate Professor of European Studies at the Johns Hopkins School of Advanced International
Studies in Washington, D.C.
Postcommunist Europe and Eurasia have sometimes been called a nat-
ural laboratory for social-science research, since the countries of these
regions shared similar beginnings after communism fell in 1989–91, but
then diverged dramatically in political and economic outcomes. This
divergence can be explained by several overlapping factors that distinguish the more northern and western postcommunist states from their
neighbors to the south and east. These include level of economic development, experience of democracy, distance from Brussels, and religious
heritage. The new member states of the European Union (EU) tend to be
richer, more democratic, and more Western.
Social spending also differs along these axes. While the more developed, democratic, and Western countries of Central and Eastern Europe (CEE) have maintained a high level of social protection that makes
them comparable to other EU countries, the states of the former Soviet
Union (FSU) and Southeastern Europe have experienced a partial disintegration of their social safety nets. In a worldwide survey of economic
transformation in the developing world conducted by the Bertelsmann
Foundation, the formerly communist CEE countries scored top ratings
for “welfare regime/social welfare mechanisms,” together with Chile,
Singapore, South Korea, Taiwan, and Uruguay, while Armenia, Kazakhstan, Russia, and Ukraine found their place nearer to the bottom of
the list, along with Ghana, Jordan, Mexico, Peru, and Saudi Arabia.1
Democracy has certainly played a role in determining these outcomes. The Bertelsmann report found that the top fifteen developingcountry welfare states, with the exception of Singapore, were also wellfunctioning democracies. Surprisingly, autocracies scored better than
“defective” (Ukraine) and “highly defective” (Russia) democracies on
Journal of Democracy Volume 19, Number 4 October 2008
© 2008 National Endowment for Democracy and The Johns Hopkins University Press
Mitchell A. Orenstein
81
average, though worse than well-functioning democracies. Postcommunist countries clearly differ in numerous ways, but the additional voice
that people gain through democratic institutions has been crucial to the
largely positive social-welfare outcomes in the new EU member states.
Conversely, the lack of popular voice in politics allows former Soviet
states to ignore the plight of the socially weak.
This conclusion comes through not only in aggregate data but also in
numerous case studies of social-policy making in postcommunist countries. Linda J. Cook’s recent study undertakes a detailed comparison
of welfare-state policy-making processes and outcomes in Kazakhstan,
Poland, and Russia.2 Cook shows clearly that across a wide variety of
social-policy areas, from education to health to pensions, democratic
policy processes in Poland took citizens’ interests more seriously into
account and resulted in social programs that were more effective. Kazakhstan had the least democratic policy processes, while Russia occupied something of a middle ground. As Cook’s account illustrates,
countries with more authoritarian political systems have been able to
eviscerate aspects of the welfare state without facing substantial popular
resistance.
Cook gives the example of primary- and secondary-school finance
reform in Russia under President Boris Yeltsin, which destroyed the
central system of school finance, cut the number of years of mandatory
schooling, and sent thousands of teenagers into the streets. Enrollment
and educational quality plummeted, particularly at the upper-secondary
level, as the federal guarantee of free education was cut by two years,
from age seventeen to fifteen, undermining Russia’s key comparative
advantage in education. Although subsequent Russian governments have
taken steps to reverse the damage, they have not been able to put the genie back in the bottle. Similar studies have shown that regime type has
also affected the pension-reform process in postcommunist countries,
with more authoritarian governments making more substantial cuts.3
At the same time, one should be wary of overstating the contrast
by casting a Central European social paradise against a former Soviet
catastrophe. The picture is not all black and white. Things are neither
so perfect in the advanced democracies of postcommunist Europe, nor
entirely bleak in much of the former Soviet Union. While well-functioning democracy is highly correlated with welfare-state effort, inequality
has increased rapidly in the new EU member states. The Czech Republic, Hungary, Poland, and Slovakia have experienced a rapid growth
both in wealth and in income inequality that could have a destabilizing
effect on welfare-state institutions over the long run. Meanwhile, the
social situation in former Soviet states such as Kazakhstan, Russia, and
Ukraine is comparable to or even better than what one finds in other
developing countries—India and China, for example. Although the most
poorly performing postcommunist welfare states do not function as well
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as they used to, they continue to provide a significant level of social
protection. The socialist legacy has been cut back, but it has not entirely
disappeared.
Communist-era welfare states were unique in four key ways, and they
therefore left a unique legacy for postcommunist governments to address. To begin with, communist welfare
states were built on the foundations of
an economic system that provided (and
The lack of popular
voice in politics allows even required) full employment. Full
employment was a central enabling feathe governments of
ture of communist welfare states because
former Soviet states to
it helped to keep the costs of extensive
ignore the plight of the
social provision low. Since more people
socially weak.
worked in the communist countries than
in many developed Western states, the
payroll-tax base was wider, and there
was less demand for state social assistance. Participation in the labor
force under communism, particularly among women, surpassed the level
found even in liberal market economies such as that of the United States,
where market incentives to work are normally very high.4
Second, while communist-era benefit levels and service quality were
typically lower than in developed Western countries, the extent of social
provision and the variety of mechanisms for achieving social aims were
broader. Communist welfare states not only adopted the social-service,
social-transfer, and insurance systems typical in advanced countries—
universal medical care, old-age and disability pensions, and maternity
and family benefits—they also subsidized basic foodstuffs (and alcohol), provided housing, and made affordable to much of the population
cultural activities and entertainment, vacation houses and hotels. It was
not uncommon in communist countries to see busloads of factory workers dropped off at national theaters or concert halls to take advantage of
high culture.
Third, a distinctive feature of the communist welfare state was the
leading role that state-owned enterprises played in social provision.5
Since these enterprises were not profit-making entities, but rather institutions serving the good of “the people,” they took on social-provision
functions that would be unusual in the West—providing housing, subsidized food, health care, day care, entertainment, vacation homes, and
a variety of other social goods for their employees and their families.
These benefits were stratified, with better services and housing reserved
for preferred groups of workers and managers. Such provisions were,
however, available to a wide swath of the population. Enterprise social
provision under communism also served as a form of vertical integration. Because market provision of certain goods (housing and food) was
lacking, enterprises had to provide them.
Mitchell A. Orenstein
83
Fourth, communist states had unusual intentions behind their welfare-state institutions. Communist governments provided far more social benefits to their citizens than did other authoritarian states, proving that democracies had not cornered the market on the provision of
welfare. Communist ideals, which emphasized equality and valued the
working class, had a major impact on state behavior. On the other hand,
communist regimes also used their control over the distribution of social benefits to punish opponents and reward supporters in a systematic
manner, turning the welfare state into a finely tuned mechanism for differential distribution.
In sum, the communist welfare states bequeathed a unique structural
legacy based on full employment and enterprise-related benefits. Moreover, they were far more generous than noncommunist countries at a
similar level of economic development.6 Thus those who had lived under
communism came to have great expectations about the state’s role in social provision. Public-opinion polls bear this out, showing that citizens
of postcommunist countries (much like their West European neighbors)
expect the state to play a greater role in the economy and the provision
of social goods than do the people of developing countries.7 This proved
salient in democratic politics during the postcommunist transition.
A Rocky Transition
Not long after communism collapsed, three major changes shook the
now-postcommunist welfare states: the elimination of most price subsidies, the end of full employment, and the transformation of state-owned
enterprises into profit-making entities. These shocks came at a time of
growing social need. Economic reform caused a massive recession that
was far deeper than even most pessimists had expected. Poverty rates
rose dramatically in most states, reaching 30 percent of the population
in some, and life expectancy fell—most dramatically in Russia, where
male life expectancy dropped from 63.8 years in 1990 to 57.6 in 1994,
before recovering to 58.9 in 2006. At the same time, inequality increased
dramatically, creating sharp divisions between the “winners” and “losers” of the transition period. Even in such high-performing countries as
Poland, which returned to pre-1989 levels of economic output within
four to five years and then began a period of solid economic growth,
socioeconomic changes still took a massive toll.
While communist economies had not performed particularly well, they
did ensure a basic standard of living for all. As this guarantee began to
unravel, governments sought to address the growing social crisis with a
set of emergency responses that shaped welfare-state policy through the
mid-1990s. Coordinated policy responses began to emerge only later.
Radical market-liberalization programs, intended to keep the transitional recession as brief as possible, took aim at the extensive state
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subsidies—for basic foodstuffs, consumer goods, electricity, and other utilities—provided under communism. Under the prevailing liberal
market approach, these subsidies were thought to be market distorting,
undermining rapid economic adjustment and the return to growth. Technically, they were also relatively easy to eliminate. For example, postcommunist governments could simply stop paying bakeries to produce
low-cost bread and so on.
Some subsidies (including those for food) were eliminated quickly;
others (housing, utilities, and transport) were phased out over time.
Though Western advisers urged the postcommunist countries to replace
subsidies with systems of cash benefits to compensate the poor, these
cash payments either failed to materialize or fell short. This had a terrible
impact on poverty during the transition. In 1997, Olivier Blanchard, a
leading liberal economist, suggested that eliminating the subsidies may
have been a mistake.8 The price distortions created by subsidies may not
have been as damaging as the economic and employment impact of their
abrupt removal.
The sudden creation of labor markets and the collapse of guaranteed full employment presented the second major shock to the transition states. Labor-market liberalization empowered enterprises to lay off
workers. Those first dismissed were often the oldest and least productive workers, along with discriminated-against ethnic minorities such
as the Roma. As a result, the formal labor force contracted sharply, and
a large, unofficial “gray” economy developed. Meanwhile, the demand
for social benefits such as early retirement grew. Faced with decreasing
resources, social-policy budgets could not meet the increasing needs.
Thus states felt massive and immediate fiscal pressure to reform.
Finally, formerly state-owned enterprises began to shirk social functions as they faced new demands for profitability. These now-privatized
operations came under pressure to turn a profit, which meant that they
could no longer maintain large, underutilized work forces and social assets that did not help the bottom line. Whereas under communism there
had been a rationale for providing housing to employees, under market
capitalism workers could find somewhere to live on their own. Tying
up capital in unprofitable housing projects suddenly stopped making
business sense.
The end of subsidies, full employment, and enterprise-based social
provision created enormous pressure for welfare-policy reform. Yet
neoliberal economic advisors—long used to dealing with developing
countries that lacked extensive social policies—largely ignored state
welfare programs aside from unemployment insurance (a key element of
neoliberal reform programs in Central and Eastern Europe). At the dawn
of the transition, international financial institutions, including the World
Bank, had little expertise in pension systems, for instance, and thus little
in the way of policy advice. The neoliberal “Washington Consensus”
Mitchell A. Orenstein
85
was clear on trade policy, market liberalization, and privatization, but
had little to say on the social-sector restructuring that was to become
such a large part of postcommunist transformation.
The Social-Policy Deficit
The combination of immediate, severe crisis and the lack of significant economic-policy thinking on welfare-state transformation led to
the adoption of a wide variety of “emergency measures” to combat the
dramatic rise of poverty, unemployment, and other social crises.9 Countries responded in a variety of ways to common policy pressures. Often
these responses reflected the unique influence of small groups of expert
policy makers in each country. Sometimes, ill-conceived “emergency
measures” created significant problems down the road. This was the
case in Poland, which radically expanded early retirement as a way of
coping with high unemployment, but later ended up spending a larger
share of GDP on pensions than any other member of the Organization
for Economic Co-operation and Development (OECD).10
Still, emergency measures were often better than nothing. When governments failed to respond to emerging social-policy crises, programs
began to crumble. For example, Russia and Romania did not alter pension benefits sufficiently to cope with real demand and thus began to fall
behind on pension payments. This severely diminished trust in government, which was already low in most postcommunist countries. Such
collapses no doubt contributed to increased mortality rates.
At the same time, new social situations demanded wholly new programs. Unemployment insurance, for example, was needed to address
the new and dreaded problem of mass unemployment, which leading
neoliberal economists expected to be the most challenging social issue
of transition. They worried about the Weimar precedent, whereby mass
unemployment would generate significant opposition to shaky new
democratic governments.
Transnational actors such as the World Bank and the OECD therefore assisted postcommunist governments in setting up systems of unemployment insurance across the region, foreshadowing other transnational campaigns that would emerge in the second phase of transition,
after the mid-1990s. All postcommunist countries adopted some form
of unemployment insurance in the aftermath of 1989, though they were
funded to a much greater degree in Central and Eastern Europe than
in the former Soviet Union. In 1995, all the postcommunist states of
Central and Eastern Europe provided a minimum benefit of around 30
percent of the average wage. By contrast, the Russian minimum benefit
was only about 10 percent.11
Starting in the mid-1990s, social-policy reform rose to the top of neoliberal policy agendas for Central and Eastern Europe. Once economic
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reformers finished with initial liberalization, stabilization, and privatization programs, they turned their attention to social-policy programs.
Two programs launched by Polish finance minister Leszek Balcerowicz, the first in 1990 and the second in 1998, illustrate this shift. While
the original Balcerowicz plan emphasized the usual neoliberal trinity of
stabilization, liberalization, and privatization, Balcerowicz II undertook
education, health, pension, and public-administration reform, aiming to
create a stronger state and civil society.
The impetus for social reform was accelerated by two emerging
trends in the mid-1990s: the failure of emergency measures to respond
adequately to social problems and the election of left-wing parties (often composed of former communists) that had campaigned on promises
of greater social protection. Since a major objective of neoliberal economic policy in the 1990s was to stamp out communism, the rise of leftist parties was cause for grave concern among liberal policy makers in
Central and Eastern Europe and among their Western allies—a concern
that was reflected in the dramatic increase in World Bank funding for
social-policy projects in the region.
Numerous transnational campaigns aimed to reform aspects of the
former communist welfare states, including family and other cash-transfer policies, education, and health care, but the most dramatic and arguably most significant of these campaigns targeted pension systems.12 In
1994, the World Bank released “Averting the Old Age Crisis,” a policy
report that advocated pension reforms worldwide. Responding in part to
new demands from postcommunist countries for pension-policy advice,
the World Bank formulated a clear template for reform and developed a
core group of policy advocates in the course of preparing the report.
The World Bank took on board many ideas originating from the early1980s Chilean pension reform, which replaced a pay-as-you-go system
with one based on individual pension-savings accounts, but the Bank
viewed this blanket reform as too revolutionary for many postcommunist countries. Instead, it recommended partial privatization, creating
a mixed system that would rely on three “pillars” of pension coverage: a basic state pension, a mandatory system of individual accounts,
and a variety of voluntary or occupational plans. This flexible approach
garnered substantial interest in CEE and FSU countries as World Bank
reform advocates fanned out across the region, promoting reform in
leading states such as Poland and Hungary, and then throughout the
postcommunist region.
Between 1994 and 2004, eleven postcommunist countries partially
privatized their pension systems: Bulgaria, Croatia, Estonia, Hungary,
Kosovo, Latvia, Lithuania, Macedonia, Poland, Romania, and Russia.
Although the reformed systems are not identical across these countries,
the case of pension privatization shows that transnational actors had a
fundamental influence on the social-policy agenda in postcommunist
Mitchell A. Orenstein
87
countries after the mid-1990s. They exercised this influence in many
other areas as well, setting standards for health reform and reshaping
unemployment-benefit systems and many other programs.
At the same time, the EU began negotiations with the Central European candidates for accession. Within this process, the EU pushed for
social-policy changes to bring the candidate countries into conformance
with the rest of the EU.13 In particular, the EU focused heavily on labor
standards, health and safety standards, public health, and the treatment
of national minorities.
In sum, transnational actors had a fundamental impact on social policy in transition countries after the mid-1990s. One might expect that
these transnational organizations and the reforms that they advocated
would have a similar effect on all countries. Yet countries with stronger
democratic institutions were able to implement reforms in ways that fit
better with domestic circumstances and responded more adequately to
social needs.
The Impact of Democracy
The level of democracy is positively correlated with the level of social expenditure in postcommunist Europe and Eurasia (see Figure 1 on
page 88).14 The highest-rated democracies spend considerably more on
social protection as a share of GDP than do other states in the region—as
much as 10 percent more. The only exceptions are Estonia and Latvia,
which spend about the same as the more generous former Soviet states.
Interestingly, both less-effective democracies and authoritarian regimes
spend about the same on social protection, bearing out the findings of
the Bertelsmann Report cited above. Croatia is the only significant outlier in this sample, with high social spending and low democracy scores,
possibly because of the impact of the wars in the former Yugoslavia.
Belarus, the most unreformed postcommunist state, is the most generous
authoritarian regime, but spends a lower share of its (smaller) GDP on
social expenditures than do the well-functioning democracies.
On the other hand, as the figure suggests, democratic institutions
are not the only factors at work. History, international influences, and
the level of economic development must also be considered. Historical
legacies provide a leading explanation for social spending in the postcommunist states. They help to explain two features of state welfare
spending in the postcommunist countries: their relatively high level of
social expenditures compared to much of the developing world, and the
evident differences between Central and Eastern Europe and the rest of
the postcommunist region. Stephan Haggard and Robert R. Kaufman
argue that the communist legacy led CEE countries to invest more in
social provisions than Latin American or East Asian countries at a similar level of development.15 Countries in the latter two regions generally
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Journal of Democracy
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Figure 1—Democracy and Social Spending
in Postcommunist Countries
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Figure 1: The x-axis represents the average of Freedom House’s political-rights and civil-liberties scores,
2000); the y-axis represents public social protection and health expenditures as a percentage of GDP.
Source: International Monetary Fund Government Finance Statistics, “Public Social Protection and Health
Expenditures as a Percentage of GDP.” Available at www.ilo.org/dyn/sesame/ifpses.home.
spend less than 10 percent of GDP on public welfare and health care,
compared with 20 to 30 percent of GDP in CEE and FSU countries.16
Central and East European countries have a lengthy history of social programs that long precedes communism, extending back to the
Bismarckian era and the Austro-Hungarian monarchy. According to
Tomasz Inglot, these precommunist legacies influence how policy makers and the public think about social-welfare institutions and thus keep
policy traveling along well-worn paths.17 They also distinguish the CEE
countries from the former Soviet states, which did not have substantial
precommunist welfare-state traditions.
International influences have also affected social expenditures and
help to explain differences between new EU members and postcommunist countries to the south and east.18 The EU set a wide array of
conditionalities for countries seeking membership. Ten CEE countries
joined the EU in 2004 and 2007. While social protection is mostly
regulated by member states themselves, the EU did exert influence on
domestic social-policy making among its prospective new members.
EU officials expressed concern about the possibility of “social dumping” from CEE countries, worrying that low levels of social spending
in Central and Eastern Europe would force people to move west or to
export their social and medical problems. Thus the EU encouraged
Mitchell A. Orenstein
89
prospective members to maintain a “European” level of social protection, but stressed that this should be affordable and sustainable. This
explains, at least in part, the relatively high welfare spending of some
CEE states.
Some observers assert that the World Bank had a greater influence on
social policy in CEE countries than did the EU.19 The Bank was certainly the largest and most vigorous promoter of social-policy campaigns
in Central and Eastern Europe and the former Soviet Union during the
transition period. It coordinated its activities, however, with other transnational actors, including the EU. Thus its advice was not the same in
all countries, but rather calibrated to country conditions, including their
likelihood of accession to the EU.
The World Bank coordinated its pension-reform advice with the
EU Commission, even when advising against EU norms—regarding pension privatization, for example. The EU had some ability to
thwart these reforms but chose not to use it.20 Meanwhile, the Bank has
pushed for lower social expenditures throughout the postcommunist
states, but may have moderated its pressure on the new EU members.
International influences have tended to overlap with democratic institutional pressures. The EU, for instance, required both European standards of social policy and strict conditions of democratic governance.
Both factors also overlap with wealth and geography in the postcommunist region.
Political economy also factors into social spending and democracy.
Oil-rich countries, for example, which as a group are less democratic
than would be predicted by their wealth, spend less on social protection. Russia, a main exporter of oil, is one of the least generous of
the former-communist welfare states. A country’s wealth is also an
important factor. Relatively wealthy CEE states spend more per capita
on social protection than do the poorer FSU and Southeast European
states.
Democratic Governance Matters
Despite the obvious importance of historical legacies, international
factors, and political economy, strong democratic political institutions
clearly support higher social expenditures in CEE countries. This was
shown in Southeastern Europe as well, where social expenditures increased dramatically during democratization as trade unions and left
parties gained strength. Democratization in Central and Eastern Europe
did not strengthen the power of trade unions and socialist parties—quite
the opposite. Yet because of public expectations, leaders of all parties—
right, left, and populist—faced pressures not to slash social expenditures. Even wealthier citizens supported welfare spending for their favored programs, such as generous pension benefits.21 Moreover, where
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people have been able to protest effectively against welfare-state cuts,
pre-existing programs and spending levels have tended to endure. Here,
democracy’s impact on social spending is most evident.
Furthermore, democratic regimes consult a wider range of social and
economic groups in the formulation of social policy, which can also lead
to higher spending. In an analysis of the policy-making process in the
area of pension reform, I found that more-democratic countries included
a larger number of veto and proposal actors in the reform process than
did authoritarian regimes.22 These findings are corroborated by Linda J.
Cook’s work on Poland, Russia, and Kazakhstan, which shows that policy makers in less democratic states have more easily shut out interest
groups. Often this happens at the cabinet level. In democratic countries,
government ministers are better able vigorously to represent interests
associated with their respective ministries. In less-democratic countries,
cabinets tolerate less internal dissent; thus a variety of voices may never
be heard during the reform process.
Although democratic governance is one of several key factors differentiating the relatively higher-spending and more effective CEE welfare
states from the disintegrating safety nets of many FSU and Southeast
European countries, the picture is more nuanced. Inequality has risen
dramatically in each of these regions, and many former Soviet countries
do in fact have functional safety nets.
Communism constrained inequality and advanced the interests of
workers, so it is not surprising that inequality increased dramatically
after 1989. Although data on income disparity in the postcommunist
countries are weak, it appears that in the first two decades since the
transition, inequality in Central and Eastern Europe has risen to West
European levels, and in Russia to U.S. levels. Neither the CEE nor
Russia has approached African or Asian levels of inequality, with the
possible exception of some of the Central Asian republics. It remains
to be seen, however, whether income inequality will continue to grow.
A widening disparity could threaten the social consensus behind welfare-state spending, as wealthier individuals opt out and poorer people
fail to consolidate political support.
Despite the lower social spending in some parts of the postcommunist world, overall welfare-state spending there remains higher and
more significant than in most developing countries in Latin America and
Asia. While some countries such as Georgia and Kazakhstan have cut
back considerably, most FSU countries retain large public-health and
pension systems, and provide other cash benefits. Old-age pensions, for
instance, are important sources of income for poor families, and pension payments have increased in many FSU states as economic growth
has returned. This has been particularly pronounced in Ukraine, where
the government of Prime Minister Yuliya Tymoshenko has dramatically
increased social spending. Social safety nets, though not as generous
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91
or complete as in Soviet times, exist in even the most austere postcommunist countries, though they are not as extensive as those of advanced
West European welfare states.
Challenges for the Future
A number of challenges loom on the horizon as postcommunist welfare states move beyond the transition period into a new era. First, for the
new EU member states, one of the main challenges will be to balance the
pressures for conformance with Western levels of benefit generosity with
the desire to maintain the labor-cost advantage that is currently drawing
foreign direct investment eastward. Maintaining EU norms could demand
higher spending over time. Likewise, as CEE economies begin to grow
dramatically, these states may find it harder to resist democratic political
pressure for increased spending on social protection. Thus the CEE welfare
states will likely converge over time with their neighbors to the west.
A second major challenge will be to reorient the welfare state to cope
with aging populations and the rapid decline in fertility rates. CEE countries have some of the lowest fertility levels in the world, and as a result
these societies are rapidly aging, putting serious fiscal strain on their
pension systems and government budgets. Although birth rates have
been falling for several decades, the transition accelerated the rate of
decline. Fertility rates in most postcommunist countries today are below
replacement level. Some former communist countries have begun to create welfare-state incentives for women to have more children, including
Russia’s additional-child cash-benefit payments, initiated under President
Vladimir Putin. It remains to be seen whether this measure alone will have
an impact, but it is possible that some combination of cash payments,
improved access to child care for working mothers, and economic growth
could entice people to have more children in coming years.
Poverty among certain ethnic groups also remains a major challenge
in the postcommunist world. In particular, poverty among the Roma,
who have lower average levels of education and suffer widespread discrimination, continues to far outpace that of majority populations. Roma
are four to ten times more likely to be poor than majority ethnic groups.
If they choose to emigrate, they also face discrimination in Italy and
other West European countries.
There are no simple solutions to Romany poverty and integration,
but concerted efforts can make a difference. During the enlargement
process, the EU attempted to enforce higher minority-rights standards
on postcommunist countries and, together with the World Bank and Soros Foundation, encouraged the development of national strategies to
combat poverty among the Roma. The politics of Romany poverty however, make it difficult for politicians to pursue initiatives that facilitate
integration of the Roma. Populist politicians often campaign on hatred
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and suspicion of Roma and other minorities, and liberal politicians are
sometimes reluctant to attack this right-wing identity politics directly.
Yet issues related to poverty among the Roma are growing in social
importance. Since fertility rates have plummeted among majority populations, as many as a third of all children entering school in some CEE
countries are Roma. Thus it is critical that postcommunist welfare states
address the social exclusion of the Roma.
Finally, the structure of the postcommunist welfare states is problematic. Given their complicated trajectory during the transition—featuring
budget cuts and emergency measures—on top of their communist legacy,
postcommunist welfare states reflect a hodge-podge of different approaches. While most European welfare states fall into one of the three categories of welfare-state capitalism (liberal, conservative, or social-democratic) identified by Gosta Esping-Andersen, the postcommunist welfare
states do not. They draw heavily on conservative, Bismarckian traditions,
meaning a strong reliance on social insurance and status-preserving benefits—in other words, the better-off have a stronger safety net—and an
emphasis on supporting traditional family structures. Additionally, postcommunist states have drawn considerable inspiration from international
organizations that have supported a liberal model, which argues that the
welfare state should not conflict with incentives for paid employment.
According to this model, welfare-state programs should aim to provide a
safety net for the poorest members of society, rather than a cushion for the
middle classes. Postcommunist welfare states also display similarities to
South European welfare states, insofar as democratization has coincided
with a rapid (re)development of welfare-state institutions.
One challenge for postcommunist welfare states is that the conservative tradition on which they draw appears to be the least effective method
of organizing welfare-state commitments in Europe.23 Whereas liberal
welfare states such as the United Kingdom and Ireland have prospered
in recent years due to lower labor costs and more flexible labor markets,
conservative welfare states have experienced slower economic growth,
making more people dependent on the state. Interestingly, the socialdemocratic welfare states in Scandinavia have proven remarkably resilient. After a crisis in the 1990s, the Scandinavian formula of providing a
wide range of social services and generating more jobs, particularly for
women, while establishing institutions that enable women with children
to participate in the labor market, began to bear fruit. Social spending
in these countries is high, but so is employment. Conservative welfare
states such as France and Germany, however, have continued to struggle
with high unemployment and highly protected jobs in preferred sectors
of the economy. This has aggravated problems of immigrant integration
and welfare, as shown most vividly in the French riots of 2005.
Despite the broad consensus in Europe that the conservative model
of welfare is the least effective of the three leading European models,
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postcommunist CEE states have embraced it. Strangely, the social-democratic model—arguably the most effective and perhaps the most suitable for a former communist state—held no appeal for Central and East
Europeans. Instead, CEE states drew primarily from their conservative
pasts and the liberal policies advocated by the Washington Consensus.
As the problems associated with these choices become apparent, particularly in the context of an aging population, postcommunist welfare
states may begin to reevaluate their choices.
As the postcommunist countries move beyond the transition period,
they will have to continually reassess their welfare policies, addressing
the question not only of how much to spend but also of how to direct that
spending to best address emerging social issues. While myriad factors
such as each country’s history, the influence of international organizations, political economy, birth rates, and ethnic fragmentation will in
part determine the type of welfare-state structures most suitable to individual situations, the level of democracy within each state will likewise
continue to have a major impact on the development of welfare states
in the postcommunist world. More-authoritarian states will continue to
spend less overall, although they will maintain a higher level of social
protection than one finds in much of the developing world. Countries
with effective democratic governance, on the other hand, can be expected to organize their social-protection programs in ways that correspond
with a broad array of public demands and interests.
NOTES
The author would like to thank Elizabeth Isaman of the Johns Hopkins School of Advanced International Studies for her valuable research assistance on this article.
1. Bertelsmann Stiftung, Bertelsmann Transformation Index 2008: Political Management in International Comparison (Gütersoh: Bertelsmann Stiftung, 2008), 11.
2. Linda J. Cook, Postcommunist Welfare States: Reform Politics in Russia and Eastern Europe (Ithaca: Cornell University Press, 2008).
3. Mitchell A. Orenstein, “How Politics and Institutions Affect Pension Reform in
Three Postcommunist Countries,” World Bank Policy Research Working Paper No. 2310,
March 2000.
4. OECD Economics Department, “Female Labour Force Participation: Past Trends
and Main Determinants in OECD Countries,” May 2004.
5. Martin Rein, Barry L. Friedman, and Andreas Wörgötter, eds., Enterprise and Social Benefits after Communism (Cambridge: Cambridge University Press, 1997).
6. This led economist János Kornai to deem the communist welfare states “premature”;
Kornai, “The Reform of the Welfare State and Public Opinion,” American Economic Review 87 (May 1997): 339–43.
7. Richard Rose and Toni Makkai, “Consensus or Dissensus about Welfare in Post-Communist Societies?” European Journal of Political Research 28 (September 1995): 203–24.
94
Journal of Democracy
8. Olivier Blanchard, The Economics of Post-Communist Transition (Oxford: Oxford
University Press, 2007), 128.
9. Claus Offe, “The Politics of Social Policy in East European Transitions: Antecedents, Agents, and Agenda of Reform,” Social Research 60 (Winter 1993): 649–84.
10. Michael J.G. Cain and Aleksander Surdej, “Transitional Politics or Public Choice?
Evaluating Stalled Pension Reforms in Poland,” in Linda J. Cook, Mitchell A. Orenstein,
and Marilyn Rueschemeyer, eds., Left Parties and Social Policy in Postcommunist Europe
(Boulder, Colo.: Westview, 1999).
11. Tito Boeri, Structural Change, Welfare Systems, and Labour Reallocation: Lessons from the Transition of Formerly Planned Economies (Oxford: Oxford University
Press, 2000), 132.
12. Mitchell A. Orenstein, Privatizing Pensions: The Transnational Campaign for Social Security Reform (Princeton: Princeton University Press, 2008).
13. Beate Sissenich, Building States without Society: European Union Enlargement
and the Transfer of EU Social Policy to Poland and Hungary (Lanham, Md.: Lexington
Books, 2007).
14. The figure should be interpreted carefully. IMF data on social spending may not
be highly accurate or standardized across countries, but it is the only source of socialspending data across many countries. The figure includes data not for all postcommunist
countries, but only for the subset that is included in the IMF data set.
15. Stephan Haggard and Robert R. Kaufman, Development, Democracy, and Welfare
States: Latin America, East Asia, and Eastern Europe (Princeton: Princeton University
Press, 2008).
16. IMF Government Finance Statistics, “Public Social Protection and Health Expenditures as a Percentage of GDP.” Available at www.ilo.org/dyn/sesame/ifpses.home.
17. Tomasz Inglot, Welfare States in East Central Europe, 1919–2004 (Cambridge:
Cambridge University Press, 2008); see also Alfio Cerami, Social Policy in Central and
Eastern Europe: The Emergence of a New European Welfare Regime (Münster: LIT,
2006).
18. Bob Deacon, “Eastern European Welfare States: The Impact of the Politics of Globalization,” Journal of European Social Policy 10 (May 2000): 146–61.
19. Takumi Horibayashi, “Characteristics of the Central European Welfare System,”
Journal of Social Science (Japan) 55, no. 1 (2003): 169–88.
20. Mitchell A. Orenstein, “Out-Liberalizing the EU: Pension Privatization in Central
and Eastern Europe,” Journal of European Public Policy 15 (September 2008).
21. Julia Szalai, “Poverty and the Traps of Postcommunist Welfare Reforms in Hungary: A Fourth World of Welfare Capitalism on the Rise?” Paper presented at the annual
conference of RC19, International Sociological Association, Chicago, September 2005.
22. Mitchell A. Orenstein, “How Politics and Institutions Affect Pension Reform in
Three Postcommunist Countries.”
23. André Sapir, “Globalization and the Reform of European Social Models,” Journal
of Common Market Studies 44 (June 2006): 369–90.